DOD: Buildup projects proceed: Japan prepares to pay $500M share of cost

DOD: Buildup projects proceed: Japan prepares to pay $500M share of cost

By Dionesis Tamondong • Pacific Daily News • January 27, 2010

The U.S. military is on track to award hundreds of millions of dollars in contracts for military construction projects on Guam, despite Japan's prime minister announcing plans to re-examine its deal with Washington.

"There is no change to our program," said John Jackson, director of the Joint Guam Program Office in charge of coordinating the military buildup on island. "We are planning to award construction contracts for both U.S. and Government of Japan funded projects as soon as the Record of Decision is signed later this year."

Jackson was responding to statements by Prime Minister Yukio Hatoyama on Monday that Japan might nix its accord with the U.S., and may wait until May to reach a conclusion on an agreement to relocate Marine troops in Okinawa.

The Obama administration already has expressed frustrations with Tokyo's delays in finalizing the relocation of the Futenma base, saying it is delaying a sweeping realignment plan for U.S. military in the region, including Guam.

But Jackson noted the Japan government has already deposited $336 million for projects on Guam, and officials are preparing to submit a $500 million budget for more projects here as part of Japan's fiscal 2010 budget.

He said the Department of Defense has started to use some of the $336 million funding with the awarding of design contracts.

While the delays may allow the island more time to prepare for the population boom expected with the buildup, it doesn't bode well for those investing or planning to invest in projects expected to profit from the buildup.

Nick Captain, president of the Captain Real Estate Group, said many local investors expected and planned for some delays in the aggressive buildup timeline initially provided.

Local, smaller companies would appreciate a longer-term approach to the buildup, he added.

"The shorter the time period that the buildup occurs in, the less likely it is that any local, small companies will significantly benefit from that buildup," he said.

But for foreign investors, the uncertainties caused by delays likely will result in them being less interested in investing.

"It may also probably lead to a slowdown in the willingness of lenders to close major transactions that perhaps were primarily geared toward the benefits associated with the military buildup," Captain said.

Delays and uncertainties over the buildup don't bode well especially for those who are deep into their investment projects.

"It's a very difficult situation to be in if you already have major projects under way," Captain said.

Kenneth Lujan, branch manager for the Small Business Administration on Guam, said his office has seen an increase in the number of loan applications from small construction companies.

Many are trying to obtain capital or fortify their inventory as they plan to pursue contracts and subcontracts for military construction or service projects. President Obama has approved more than $700 million in military construction projects on Guam this fiscal year.

But if the buildup hits a snag or significant delays, these companies may have to scale down their operations and will have difficulty paying back their loans, Lujan noted.

"They will have to regroup and take a look at their resources," Lujan said, adding his office is prepared to provide technical assistance to applicants who need it.

Guam Chamber of Commerce President David Leddy said the Chamber will "continue to be a voice for our local businesses and an advocate for our community, regardless of the buildup plans."

Defense Secretary Robert Gates in October had said changing the terms of the Futenma relocation is not negotiable. Without the Futenma realignment, there will be no relocation to Guam, he has said.

Regional experts have said Japan's demands are part of its strategic posturing expected with the government talks.

As top-level U.S. and Japan officials continue to work on their disagreements, Sen. Judith Guthertz said she wants Guam to be included in discussions between the two governments regarding plans to relocate Marines to Guam because the island will have to deal with the impact of the population influx.

Guam should no longer be ignored, said Guthertz, chairwoman of the legislative Committee on the Guam Military Buildup.